Friday, June 19, 2009

Governor Doyle's third attempt to include a Quality Rating and Improvement System (QRIS) for child care made it through the joint finance committee this time around, but appears not to be included in the Assembly and Senate versions of the budget bill. A QRIS is a voluntary rating system for child care providers that is designed to recognize quality and provide incentives to improve quality, while also allowing parents to compare quality across providers.

The most simplistic explanation for the failure of the QRIS in the past three budgets has been funding. In the first go-round, the system was introduced with an assumption of no net fiscal impact, which was unrealistic at best and disingenuous at worst. Last biennium, the price tag was attached and was deemed too pricey. This time, the Governor's proposed budget included the policy framework in this biennium, with the funding to be appropriated in the next biennium; in these uncertain times, lawmakers were reluctant to commit future funds.

Not having a child care QRIS puts Wisconsin out-of-step with other states, the majority of which have or are planning one. So how do they fund theirs? Most do as Wisconsin might have, with a tiered child care subsidy program that re-distributes the federal TANF (commonly known as welfare) funds for child care unevenly--recipient parents choosing higher quality child care get subsidized at higher rates. This, of course, necessitates that low quality child care is subsidized at a lower rate. (This lower rate would have to be lower than the current rate in order for the QRIS to cost the same as the current subsidy program.)

One state has gone about it differently, however. Louisiana has created four different tax credits to provide the fiscal incentive for participation in the state's QRIS and for improving quality. Notably, three of the four tax credits are refundable, meaning that even taxpayers who don't owe taxes can take advantage of them. The tax credits are supplemental to the state's child care subsidy program and do not replace the subsidy rates. But they are intended to provide incentive for parents and providers to participate in the QRIS and to help make quality improvements affordable.

The credits are for families who choose providers in the QRIS, with higher credits for those choosing higher quality care; for providers who participate in the QRIS, based on their quality rating and the number of subsidized children they serve; for teachers and directors who work in centers that participate in QRIS, based on their level of training and education; and for businesses that make donations to QRIS providers.

The hope is that the credits will impact consumer behavior by creating fiscal incentives for parents and providers to create a demand for higher quality in the child care market. The theory is that the tax benefits will be widely marketed by the industry, similarly to the home mortgage tax deduction, which is promoted by real estate agents, banks and developers who encourage home buyers to take it into consideration when making decisions about the home they purchase. Louisiana has hired a marketing firm to create a social marketing campaign for both the ratings system and the tax credits.

As these tax credits have been in place for just one year, it is too early to tell who is taking advantage of them and to what extent. The state estimates 1,247 teachers and directors and 73 centers were eligible for them, totaling approximately $3.5 million in state tax benefits. As centers improve their quality and earn higher ratings, and as more centers participate in the QRIS, that dollar figure would grow.

Whether Wisconsin might follow in Louisiana's footsteps is highly questionable. Supplementing federal child care subsidy dollars with state tax credits hasn't been on the table here even when a QRIS was on the table. Also, Louisiana, which passed the legislation creating its tax credits last year, before the recession was in full swing, was one of the few states not running a budget deficit at that time.

Unlike a budget appropriation, which is subject to change each year, tax credits must be repealed in order to be eliminated or reduced, which is significantly more difficult politically. Thus, Louisiana's program will likely have more stability than those of other states and will thus be monitored very closely by policy researchers. Among the questions to be answered--Will it increase participation in the QRIS? Will it increase child care quality? At what cost?